India suffered one of its deadliest terrorist attacks last night when gunmen ran amok in the wealthiest part of Mumbai, killing dozens of people, storming hospitals and luxury hotels, and taking a number of foreigners hostage.

At least 80 people were believed killed, with 10 shot dead at Chhatrapati Shivaji terminus, formerly known as Victoria terminus, one of the two big stations in central Mumbai. Shots and explosions were reported in eight locations across India's financial capital including the crowded CST railway station, and two five-star hotels, the Taj Mahal and Oberoi Trident , leaving hundreds injured. At least 11 police officers including Maharashtra's anti-terrorism squad chief, Hemant Karkare, were killed in the attacks. Karakare was killed in a bomb blast at the Oberoi Trident.

At 12.50 am local time the Taj, a Mumbai landmark, was shaken by gunfire and explosions and its roof enveloped in smoke and flames as attackers threw grenades at police outside. Near dawn this morning, police and gunmen exchanged sporadic gunfire at the two luxury hotels, where an unknown number of western hostages were still being held.

Six gunmen were killed by police and nine suspected terrorists arrested, according to reports. A previously unknown group calling itself the Deccan Mujahideen claimed responsibility for the attacks, in emails to local media outlets.

At one hospital, St George's in south Mumbai, 60 bodies and 200 injured people were brought in.

Vilasrao Deshmukh, the chief minister of Maharashtra state of which Mumbai is the capital, said he had put the army on red alert in an unprecedented admission that civil forces were unable to control the law and order situation in the city.

The police said more than 1,000 people had been evacuated from the Oberoi Trident, with waiters in black and white formal wear running across the road. At the Taj, television pictures showed some of the injured who had been evacuated on to the hotel's golden luggage carts. Several European politicians, visiting Mumbai in advance of an EU-India summit, were among those inside the hotel. Sajjad Karim, a Tory MEP, told the Press Association by phone from the basement that he and several others were barricaded inside the Taj.

"I was in the lobby of the hotel when gunmen came in and people started running," he said. "A gunman just stood there spraying bullets around, right next to me. I managed to turn away and I ran into the hotel kitchen."

Janice Sequeira, a tourist who had been at a restaurant in the Taj, told reporters it had been "really scary. It was like the sound of loud crackers, not one but several, we just ran out of there."

At the Oberoi Trident, gunmen burst into the Kandahar restaurant and reportedly took American and British nationals hostage.

Rakesh Patel, a 41-year-old Londoner working for HSBC, told the Guardian that he had been having a dinner at the Taj with two Indian colleagues when the two "very agitated" young gunmen burst in.

"They rounded up about 15 people and brought them through to the kitchen and up a fire escape to the 10th floor, where they had us against the wall," he said. "They said that they wanted to take us to the roof, and tied up two women. They were asking for any US and UK passport holders and got everyone to drop their phones on the ground. At that point there was a huge blast and in all the smoke I managed to run back down the fire escape."

On Times Now, a local television station, a British man with a soot-covered face described how two armed young men aged between 20 and 25 entered the Trident hotel restaurant in the late evening and demanded that "only American and British passport holders remain".

According to the man, 10 people were taken towards the rooftop but when smoke filled the corridors of the 18th floor, he escaped. "I ran down the stairs. Another three came down. Another five went up. I don't know what happened."

Early today commandos had begun to enter both the Taj and Trident in groups of 15 in an attempt to rescue hostages and disarm the attackers. Groups of hotel guests and staff remained holed up throughout the Taj, parts of which were on fire.

The attacks began at 10.33pm local time at the Chhatrapathi Shivaji terminus (CST). The gunmen then sprayed bullets at a popular restaurant, Cafe Leopold, leaving it with bloodstains on the floor and shoes left by fleeing customers. Another three people were killed in a bomb explosion in a taxi in Mazegaon dockyard road. There were also reports of a boat packed with explosives being defused at the Gateway of India, another symbol of the country.

Indian news channels showed wreckage of bombed cars, blasted scooters, the remains of shops and broken glass strewn across the streets of south Mumbai. Armed police set up barricades around the sites of the attacks, and local people were seen shouting at each other, angry that another terror attack had hit the city.

Vehicles and street vendors' barrows were used to keep them away, and speeding military four-wheel drives with horns blaring arrived at the bomb sites.

Mumbai has frequently been hit by terrorist attacks, including a series of blasts in July 2006 that killed 187 people. In March 1993, Muslim underworld figures allegedly carried out a series of bombings in the city in which more than 200 people died.

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